2009 will be 'disastrous' for drinks industry, says report

 

IRELAND’S LOVE affair with alcohol waned in 2008, with 2009 shaping up to be a “disastrous” year for the industry, according to a new report published by the Drinks Industry Group of Ireland (DIGI).

Plunging consumer confidence in the economy and cross-Border shopping combined to result in almost a 6 per cent drop in sales volumes of alcohol in the Republic last year, figures compiled by DCU economist Anthony Foley show.

The decline marked the worst performance by the €7 billion drinks industry in 25 years. The fall-off in volumes accelerated in the second half of the year and was more pronounced in the on-trade (bars) than it was in the off-trade (off-licences and supermarkets), as more people chose to drink at home.

Around 9,000-10,000 jobs will be lost across the drinks industry in 2009 based on the current trends, said DIGI chairman Kieran Tobin.

“This will come on top of those losses that have already been sustained in the past year, meaning that the numbers employed in the sector will have fallen from 100,000 to approximately 80,000 in just over two years.”

All four categories of drink show a decline in sales volumes. The cider market was the worst hit, with volumes sinking 11 per cent. Spirits volumes were down 7.7 per cent and beer drinking declined 5 per cent. Wine sales proved most resilient to recession and cross-Border shopping, with volumes slipping 4.1 per cent.

Alcohol prices increased 3.6 per cent last year, which DIGI said was below general rates of inflation.

Bar sales of alcohol were estimated to have dropped by 9 per cent last year, while off-licence sales volumes fell 3 per cent, resulting in an increase in the off-trade market share to an estimated 52 per cent. Mr Tobin, who is communications and corporate affairs director for Irish Distillers Pernod Ricard, said this was heightening the risk to jobs as the on-trade is 90 per cent of employment in the drinks industry.

Mr Tobin said more jobs would be lost if the Government increased excise duties on alcohol in the emergency budget, as it would result in more alcohol sales migrating to Northern Ireland. Based on current trends, more than €100 million in tax revenues would be lost to cross-Border shopping this year.

“I’m afraid the old reliables no longer really live up to their billing,” Mr Tobin said.

Alcohol sales in the Republic are now back to 1997-1998 levels and are about 13 per cent below the peak levels of consumption reached in 2001. The per capita consumption of alcohol dropped below 10 litres of pure alcohol in 2008, the report said.

The true levels of consumption may be higher once cross-Border purchases are added on. However, DIGI said there was still a substantial consumption decline of around 5 per cent in 2008, once the increased level of cross-Border sales is taken into account.

“It is an unmitigated miserable set of figures,” said Mr Foley. “2009 is shaping up to be a disastrous year.”

He said increases in alcohol taxes were inequitable because they had a disproportionate impact on lower-income people.

The industry would not be rescued by exports, Mr Foley said: “My view is that I don’t see any dramatic growth in international consumption that would act as salvation.”